Let S = $100, K = $95, r = 8%, σ = 0.3, 6 = 0, T = 1 year. The stock price is modeled by a 3-period binomial forward tree and the length of each period is 4 months. Determine the premium of 95-strike American put with 1 year to expiration.

Let S = $100, K = $95, r = 8%, σ = 0.3, 6 = 0, T = 1 year. The stock price is modeled by a 3-period binomial forward tree and the length of each period is 4 months. Determine the premium of 95-strike American put with 1 year to expiration.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter5: Financial Options

Section: Chapter Questions

Problem 6P: Binomial Model The current price of a stock is 20. In 1 year, the price will be either 26 or 16. The...

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Subject: physics

Let S = $100, K = $95, r = 8%, o = 0.3, 6 = 0, T = 1 year. The stock price is modeled by
a 3-period binomial forward tree and the length of each period is 4 months.
Determine the premium of 95-strike American put with 1 year to expiration.

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